The recent outbreak continues to affect Nigeria’s currency at the Forward Market as the Nigerian Naira hits N509 to $1 at FX market, as demand for the U.S dollar climbs up. Traders were already trading at this current rate as at Monday 27th April, 2020 before it hits the Forward Market as well.
Nigeria’s currency continued to depreciate at the forward market, in view of growing concerns that the Central Bank of Nigeria (CBN) might have to devalue the naira again.
The 21-month naira forward contract was trading at N509 per dollar as at 4:30 pm on Monday, indicating that currency traders have foreseen the naira falling to that rate before the end of 2020.
In March, 2020, Nigeria’s apex bank moved to combine the two rates (i.e., the official rate and rate for investors) when it devalued the naira from N307 to N360 to the dollar. The CBN had also increased the rate for investors and exporters from N366 to N380 to the dollar on March 21, 2020.
It is important to note that the forward market is an OTC (Over the Counter) market platform that sets the price of a financial instrument or asset for future delivery designed in contracts. Forward markets are generally used for trading a range of financial instruments, especially in the currency market.
Meanwhile, a few retail investors are trying to expand their portfolios by shifting to foreign-dominated assets. Omotola Abimbola, an analyst at Chapel Hill Denham, said through a call to Bloomberg, “For us to see improved convergence in the rates, we need to see the central bank stepping into the foreign exchange market again to begin intervention sales.”
The Nigerian currency had been hitting low levels on the over-the-counter spot and black markets since early March, after the Central Bank devalued the naira by 15%, triggered by falling oil prices.
However, the current depreciation rate of the Naira to Dollar will most definitely affect the nation’s economy negatively. The country is still trying to battle with the pandemic and the huge deal in oil prices per barrel. With this current stats, the current is most likely heading towards an inflation period where prices of local goods would be hiked as well.
Meanwhile, Majority of businesses will be moving to intangible and foreign assets to protect they’re resources. This is indeed a hard time in the country, and it’ll be harder on the masses, I just hope this is hike will be temporal and things return back to the way they were before now*NEW UPDATE
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